In their market-wrapping commentary yesterday the folks at Bespoke Investment Group found themselves a bit perplexed over yesterday's action in the stock market.
They pointed to notably bad news coming from the first study on vaccine effectiveness versus the Omicron variant:
"The research head of a lab at South Africa’s Africa Health Research Institute released results which studied the impact of antibodies in blood plasma from individuals vaccinated with Pfizer (PFE) led to a 40x reduction in neutralization capacity against Omicron."
Although they also pointed out (in their pre-market note yesterday) that yesterday's early morning Omicron news was indeed constructive:
"It is still early to draw firm conclusions but we have two good pieces of news on Omicron today. First, GlaxoSmithKline (ADR GSK) announced initial findings that its sotrovimab monoclonal antibody cocktail retained effectiveness versus omicron. That loosely suggests that other antibodies and therapies designed to treat the virus will be more effective than feared given the structure of the variant’s genetic changes (though this is not final confirmation or anything close)."
"...when we use the same wave dates and look at cumulative deaths by wave in South Africa, the numbers for Omicron are far lower than at similar points in the last two waves. While death counts were much lower in the initial COVID wave than they are currently, cases were also a tiny fraction of current.
"Bottom line: since the South African case surge began three weeks ago, cumulative deaths are 0.6% of cumulative cases, versus 2.3% to 3.2% in prior waves. More time is needed to make sure, but this data from the first three weeks of the wave suggests either Omicron itself is far less lethal or that previous infection/vaccines are highly effective at preventing serious disease still, or some combination of the two."
That early morning optimism aside, Bespoke was surprised that the later-arriving news around vaccine effectiveness (potential lack thereof) had virtually zero impact on yesterday's trading.
So, either the market's living on a glass-half-full feel over the latest news surrounding COVID, or (and/or), simply, stocks dipped a bit and the Pavlovian buy-the-dip response that's been drilled into today's retail investor is very much alive and well.
As they indeed bought the Omicron dip -- in all-time-record fashion no less:
Asian equities rallied overnight, will all but 3 of the 13 markets we track closing higher.
Europe's taking a breather this morning, with only 6 of the 19 bourses we follow in the green, as I type.
US major averages are mostly lower: Dow down 105 points (0.29%), SP500 down 0.25%, SP500 Equal Weight up 0.05%, Nasdaq 100 down 0.32%, Nasdaq Comp down 0.10%, Russell 2000 up 0.38%.
The VIX sits at 21.73, down 0.78%.
Oil futures are down 0.29%, gold's down 0.15%, silver's down 0.29%, copper futures are up 0.61% and the ag complex is flat.
The 10-year treasury is down (yield up) and the dollar is down 0.36%.
Led by carbon credits, MP (rare earth miner), Disney, base metals futures and Indian equities -- but dragged by chip makers, Verizon, financials, consumer staples and silver -- our core portfolio is off 0.09% to start the session.
Thinking about the retail investor as I quote from Annie Duke's excellent book How to Decide:
"When it comes to decision-making, current conditions also play an outsized role in how we think because we have a tendency to assume that those conditions will persist. The sense that the way things are now is the way they will always be is known as status quo bias.
STATUS QUO BIAS: Our tendency to believe that the way things are today will remain the same in the future.
Of course, nearly everything changes over time."
"Paradigms shift, challenges change, market conditions evolve, and technology provides additional solutions as well as creating new problems.
When you look forward from the present, status quo bias distorts your view."
Have a great day!